GBP/USD Weekly Outlook

GBP/USD's recovery lost momentum as it approached mentioned 1.5600 cluster resistance (50% retracement of 1.6671 to 1.4557 at 1.5614) and turned sideway. With 4 hours MACD staying below signal line, an intraday top should be in place. Initial bias is neutral this week. On the downside, below 1.5178 will affirm the case that corrective rebound from 1.4557 has completed and will encourage retest of this low first. While another rise cannot be ruled out. upside is still expected to be limited by 1.5600 cluster resistance. However, decisive break of 1.5600/14 will be the first alert that whole fall from 1.8668 has completed and strong rebound might follow targeting 1.6671 resistance.

In the bigger picture, there are some different interpretations of the structure of the whole down trend from 2.1161, with different projection targets. Main question is whether fall from 1.8668 is the fifth wave in the five wave sequence from 2.1161 (1.9337, 2.0158, 1.7445, 1.8668, ?) or it's the third wave inside the fall from 2.0158. In either case, fall from 1.8668 is possibly completing a five wave sequence of its own. Strong rebound above 1.4278/4310 cluster projection target (100% projection of 1.7630 to 1.5269 from 1.6671 at 1.4310, 161.8% projection of 2.0158 to 1.7445 from 1.8668 at 1.4278), followed by break of 1.5600 resistance will suggests that a medium term bottom is formed and bring larger scale correction. Though, sustained trading below 1.4278/4310 will target 1.3680 key long term support (01 low).

In the longer term picture, recent development further confirms that long term reversal has happened at 2.1161. The impulsive nature and the scale of the fall from 2.1161 also provides strong evidence to the case of the start of a long term down trend. Break of the long term trend line support confirms that whole multi decade advance from 1.0463 (85 low) has already completed with three waves up to 2.1161. In other words, the current fall from 2.1161 is just the start of a long term down trend that should eventually bring GBP/USD through 1.3680 (01 low).

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